What is cash ratio? Cash Ratio

Cash Ratio, also known as Cash Ratio in English, sometimes also called "Cash Asset Ratio" in English, is a measure of a listed company's ability to use its cash and cash equivalents to repay short-term liabilities. The cash ratio is calculated by comparing a company's cash and cash equivalents to its short-term liabilities. Cash typically includes currency, coins, and demand deposits including checking accounts, checks, and bank drafts. Cash equivalents typically include commercial paper, securities, money market funds, short-term government bonds such as Treasury bills (T-Bills), and more. Long-term Treasury bonds (T-Bonds) are generally not counted as cash and cash equivalents. Short-term liabilities typically include short-term debt, accounts payable, accrued liabilities, and other debt that the company needs to repay within one year. The cash ratio is similar to the quick ratio and current ratio, and is used to measure a company's ability to repay short-term debt. The cash ratio is the most conservative measure because it uses only cash and cash equivalents to measure its ability to repay. Since the cash ratio only considers cash and cash equivalents, if a company's cash ratio is less than 1, it does not necessarily mean that there is a problem with the company's financial situation.